The ABCs of Baseball’s Next CBA

(In addition to appearing at The Captain’s Blog, this post is also being syndicated at TheYankeeAnalysts.)

Over the past two days, the NFL and its players association have been engaged in a high stakes game of chicken. Will the league lock the players out? Will the union decertify first and force the fate of a new CBA into the courts? Or, will both parties agree to an extension, thereby allowing each side to stare down the other for at least another week?

Meanwhile, almost 10 months before its current CBA expires, baseball’s management committee and players union met for the first time, and had what new MLBPA head Michael Weiner described as a “productive session”. What a difference a decade makes! Not too long ago, it was the NFL that enjoyed relative labor peace, while baseball had to battle tooth and nail for every new CBA extension. Maybe salary caps aren’t a panacea after all?

As recently as 2002, baseball’s owners and players remained bitter enemies when it came to negotiating a CBA. That year, the players went so far as to set an August 30 strike deadline, but an agreement was eventually reached without a work stoppage. It was the first time since 1972 that the two sides had been able to make a deal without a lockout or a walkout, and the momentum from that negotiation was carried over to 2006, when the current contract was completed two months before the previous one’s expiration.

So, what has happened since 2002 to foster baseball’s current labor peace? Perhaps it was the near doubling of league-wide revenue (even in the midst of a drastic recession) over the past eight seasons?

MLB Yearly Revenue, 2003-2010

Source: Forbes and MLB.com

After so many years of acrimony, it seems as if baseball’s owners and players have found a way to share the game’s enormous wealth. However, that doesn’t mean the upcoming CBA will be completely uneventful. Just because neither side is likely to seek a major change to the sport’s financial system doesn’t mean each party won’t have a wish list they’d like to incorporate into the current setup. Listed below are some possible issues that could come up during the negotiations.

Owners’ Wish List

1) International Draft

The upcoming CBA could go a long way toward defining Bud Selig's legacy as commissioner.

The spiraling cost of international free agents has led to some rumblings about the need for a draft that includes foreign born players. Not only would an international draft drastically reduce the leverage currently held by players excluded from the Rule IV structure, but it would also remove the imperative for clubs to build training facilities in foreign countries. Paying less money in salaries and eliminating the need to invest in overseas academies would be a double-win for the owners. An added benefit of an international draft is it wouldn’t impact the current members of the MLBPA, who might be more inclined to bargain away the rights of future members, especially if it is presented as a fairness issue when compared to amateurs who are beholden to the Rule IV draft.

Side Note: Of all the potential changes that could come as a result of a new CBA, an international draft would be the most disastrous. As I’ve argued previously, baseball’s immense investment in foreign countries has resulted in a golden age of talent. If owners are given an incentive to cease this investment, the overall talent pool is likely to suffer as a result. It remains to be seen how strongly the MLBPA would oppose an international draft, but perhaps the organization’s growing percentage of foreign membership will prevent it from making a shortsighted decision.

2) Mandatory Slotting

Just as international free agents have become more expensive, so to have Rule IV amateurs. Although baseball currently has a “suggested” slotting system, just about every team exceeds its recommendations. According to some reports, mandatory slotting has become a pet project for Bud Selig, who has been concerned about the inequitable distribution of talent caused by teams passing on superior players with “signability issues”. Of course, the MLBPA is likely to suspect that Selig’s only concern is the monetary cost. Unlike the international draft, the union will have more incentive to resist this change because Rule IV eligible amateurs are already subject to the six-year reserve clause, so fairness will not be an issue.

3) Expanded Playoffs

This is another potential issue that could find minimal resistance from the MLBPA, provided the owners make a corresponding concession. The added revenue from an expanded playoff format (both directly from attendance and television rights as well as indirectly from an alleged increase in regular season interest) could fatten the pockets of both parties, so the main point of contention would likely be agreeing upon the formula to divide the increased money.

4) Increased Drug Testing

Now that baseball has finally seemed to turn the corner in its battle against PEDs, the owners may no longer be interested in enhancing the sport’s already robust drug testing program. That doesn’t mean Bud Selig won’t, however. As he seeks to write the final chapter that will define his legacy as commissioner, Selig could try to convince the owners that more steps are needed in the fight against PEDs. Because an accurate test for HGH has not been developed, there doesn’t seem to be a major area where baseball could augment its current drug policy, but if we’ve learned anything about this issue, it’s that nothing should be taken for granted.

5) Lower Luxury Tax (Competitive Balance Tax) Threshold

Baseball is expected to reach a new CBA without the usual acrimony that has existed so often in the past.

This would likely be the most contentious demand because the luxury tax has worked as a defacto “soft cap”. With only the Yankees and Red Sox regularly exceeding the limit, the MLBPA is unlikely to accept an extension of this mechanism. What’s more, big market owners may not exactly be on board with this change either. However, that doesn’t mean the owners can’t use the proposal as a bargaining chip that is quickly removed from the table in exchange for a concession from the players.

6) Eliminating the “Super Two”

Arbitration remains a bane for the owners, and significant take backs on this issue would be unrealistic. One area in which the owners could seek a reprieve is the elimination of “super twos”, or those players who become eligible for arbitration despite having fewer than three years service time. In an attempt to keep the arbitration clock from ticking, teams have regularly held back promoting their best prospects so as to avoid tripping the super two threshold. In some cases, teams have compromised the success of their season to avoid going to arbitration one year early. Eliminating this potentially expensive inconvenience would allow general managers to make decisions based on talent, not finances, but the players aren’t going to just give it away. However, because of the artificial means owners have used to curb super two status, the MLBPA may be receptive to exhanging it for something else (i.e., essentially giving the owners something they’ve already “taken” by other means).

Players’ Wish List

1) A Salary Floor Penalty

The MLBPA has always been opposed to a salary floor because the natural complement is a salary cap. However, after the embarrassing leaks of the Pittsburgh Pirates’ financials were exposed, the union may seek to balance the luxury tax with a penalty on teams who don’t spend enough. This proposal might have some support among big market owners if part (or all) of the penalty is returned to the contributing clubs. Presumably, if forced to “use it or lose it”, small market teams would spend the revenue sharing dollars they receive, which ultimately would benefit the players.

2) Adjustments to Free Agent Compensation

An emerging inconvenience for the MLBPA has been the increasing value that teams are placing on draft picks. As a result, many clubs have become reticent to sign “type-A” free agents because of the corresponding loss of draft picks. This relationship has effectively created a drag on free agent contracts, especially among those candidates who seemingly don’t deserve to be assigned “type-A” status. As a result, the MLBPA could either seek to limit the number of players classified as type-A, or at least readjust the formula to prevent an undue burden from being placed on a relatively less attractive class of free agent.

3)Adjustments to MLB’s Allowable Debt Threshold

MLB currently has a debt threshold that all teams are expected to maintain, but recent financial troubles involving the Dodgers, Rangers and Mets have called into question whether appropriate standards have been set. Considering that a team’s ability to meet payroll could be influenced by the amount of debt it holds, the MLBPA could decide to make this a defining issue in the new CBA. They likely won’t push too far, however, because the ability to borrow helps fuel revenue growth and leads to increases in franchise value. As a result, the MLBPA may push for better oversight and increased safeguards (e.g., an MLB guarantee of at least a percentage of individual team’s payroll obligations) instead of more strict regulations.

4) Increased Minimum Salary

Baseball’s starting salary in 2011 is $400,000 plus a cost of living adjustment. As a matter of rule, the minimum payout has increased with every new CBA, so there’s no reason to think otherwise this time around. In addition, the MLBPA will likely lobby for across the board increases in benefits: from meal money to healthcare.

Michael Weiner will be negotiating his first CBA as head of the MLBPA.

Over the course of the next nine months, baseball owners and the players union will likely engage in a spirited give and take that will not only include some of the issues mentioned above, but also several others not readily apparent. Although none of these issues should cause a major sticking point, both sides would be wise to maintain an open dialogue and continue making diligent preparations for the final bargaining stage. The biggest mistake each side could make is assuming that an agreement will come easily. After all, despite the current environment of détente, the next labor war is always just around the corner.

3 Responses

[…] Back in March, I identified mandatory slotting as one of the main topics to be addressed by the new CBA, so it’s not much of a surprise that the issue has momentarily held up the deal. According to Buster Olney, although some points still need to be ironed out, progress is being made on a compromise. In Olney’s report, he identifies the following elements: […]

[…] Back in March, I identified mandatory slotting as one of the main topics to be addressed by the new CBA, so it’s not much of a surprise that the issue has momentarily held up the deal.According to Buster Olney, although some points still need to be ironed out, progress is being made on a compromise. In Olney’s report, he identifies the following elements: […]